'Healthy' buy-to-let market fills gap

12 May 2003

Landlords are filling the market for first time buyers who cannot afford to enter the property market, according to research released today by the mortgage lender, Paragon Mortgages.

The buy-to-let mortgage market has done well as property prices have soared leading to many first time buyers not being able to take the first step on the property ladder.

The mortgage lender found that rental prices have remained steady despite other research from the sector that suggests that the housing market is cooling.

Paragon claimed that the proportion of revenue that landlords receive compared to the price of their property rose from 7.97 per cent in April from the low of 7.91 per cent in January.

John Heron, Paragon's managing director commented, 'Despite what some people are saying, buy-to-let is not set for a tumble - there is no bubble and there's nothing to burst.'

The mortgage lender's research highlighted that whilst there is a clear North/South divide in the amount of returns from rents, generally, rental values and demand remains high across the country. Buy-to-let properties in Yorkshire on average produced yields of 10.13 per cent in April, but properties in Greater London produced yields of 6.84 per cent.

Paragon claimed that the disparity in returns from properties was due to the fact that landlords in London and the South East have to pay more for their stock, as property prices are higher.

The research highlighted that flats produce the worst returns for landlords whilst terrace houses were found to return the best yields.

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